CMS Bancorp, Inc., (CMSB-NASDAQ) parent of
Community Mutual Savings Bank

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April 17, 2009 Issue

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CMS Bancorp, parent of Community Mutual Savings Bank, Is Focused On Being A Customer Oriented Bank, Building Shareholder Value, And Conservatively Increasing Loans And Deposits Through The Community They Serve In The Westchester, New York Area

Company Profile:

Community Mutual Savings Bank was founded as a Mutual Savings Institution in 1887 and originally operated out of a single branch location in Mt. Vernon, NY. Since its founding, Community Mutual has expanded its branch banking network to include three additional retail offices located in Eastchester, West Harrison and Greenbugh, NY. In the spring of 2009, a new branch will be added in Mount Kisco, New York. The bank's Corporate Administrative Offices are located at 123 Main Street, White Plains, New York.

In April 2007, Community Mutual Savings Bank converted from a mutual savings bank charter to a stock company. Our holding company, CMS Bancorp, Inc. is publically traded on NASDAQ under the ticker symbol “CMSB”. Since going public, Community Mutual has focused on building the infrastructure needed to grow the bank, including renovating and relocating branch facilities, upgrading the technology platform, investing in people in the lending, branch, operations and compliance areas, and adding new products for our customers including remote capture, internet banking and bill pay services.

John E. Ritacco
President and Chief Executive Officer

Mr. Ritacco has had a longstanding career in the banking industry bringing over 30 years of banking accomplishments to his role as President and Chief Executive Officer of Community Mutual Savings Bank.

Mr. Ritacco worked at a leading Rhode Island bank until 1993 before relocating to Westchester County to become First Fidelity Bancorp’s New York Commercial Banking Manager. In 1996, First Fidelity Bancorp was acquired by First Union National Bank of Charlotte, North Carolina (predecessor bank to Wachovia) where Mr. Ritacco was responsible for the New York and Connecticut Corporate Banking line of business. In 2001, Mr. Ritacco was named the Tri-State Corporate Finance Director.

Among Mr. Ritacco’s professional affiliations are his memberships in the American Community Bankers Association and the American Bankers Association.

Mr. Ritacco has been committed to community service throughout his career. He has been involved with Junior Achievement of Hudson Valley, serving as the Chairman of the Board and as a director. Mr. Ritacco has also been a director of the March of Dimes, and the Westchester Arts Council. Most recently Mr. Ritacco was the recipient of the 2008 American Diabetes Association “Father of the Year” Award.

Stephen E. Dowd, CPA
SVP – Chief Financial Officer

Mr. Dowd has over 30 years of financial management expertise that he brings to Community Mutual, most recently as Chief Financial Officer of Leveraged Technology Inc. in New York.

He began his ascent through the financial ranks as a senior audit manager at Ernst & Young, after which he rose from Assistant Controller to Assistant Treasurer at ASARCO Inc., an S&P 500, NYSE-traded mining and metals and specialty chemicals producer.

He is a member of AICPA and NYSSCPA, where he served as an executive board member. He is also the Chairman of the Village of Pleasantville Financial Advisory Committee and a member of the American Diabetes Association Father of the Year Dinner Committee.

Financial
Regional – Northeast Banks
(CMSB-NASDAQ)

CMS Bancorp, Inc., parent of
Community Mutual Savings Bank
123 Main Street, Suite 750
White Plains, NY 10601
Phone: 914-422-2700

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – April 17, 2009

CEOCFO: Mr. Ritacco, what is the vision at CMS Bancorp today?
Mr. Ritacco: “The vision at CMS Bancorp is to be a consumer oriented bank focused on building our shareholder value, and conservatively increasing our loans and deposits through our community.”

CEOCFO: Will you tell us about the area that you service and how they are faring in the current economy?
Mr. Ritacco: “The Westchester County community is about a million plus people. It is a very affluent base, highly competitive with many of the big banks as well as the smaller community and a few de novo start-up banks. The community is faring similar to what you see happening to the economy in many other parts of the country as a result of the New York City financial fall-out from the past few months. The local economy is beginning to see some slowing down and some issues related to unemployment and the downturn in the economy.”

CEOCFO: How do you break down between consumer and business and would you like to see the mix change?

Mr. Ritacco: “We went public in April of 2007, but we have historically been a mutual savings bank. In addition, our business has historically been one to four family residential mortgages, which we have continued for the last several years. However, we have been in the transition to change the mix to a more balanced mix of commercial real estate and other conservative lending.”

CEOCFO: Has your strategy and focus changed in the last few months?
Mr. Ritacco: “The strategy is that we are open for business, we are still out making loans to credit-quality and credit-worthy borrowers. Our strategy hasn’t changed a lot; we have always been very conservative in our underwriting. We have put significant amount of residential mortgage loans on our books over the past three years, somewhere around $100 million, but they have all been conservatively underwritten we believe. We have been able to maintain a high level of credit quality throughout the difficult period in particular of late, but no doubt with a 7.2% unemployment rate and some unemployment lows still out there, that could all change at this stage of the game. But honestly we have been very fortunate to date and have not seen any significant deterioration in our loans.”

CEOCFO: What is the competitive landscape like and why are people choosing Community Mutual?

Mr. Ritacco: “We are local, our decision-making capabilities are local. We believe in delivering a high-quality service, and our technology platform is what we believe to be fairly good and state-of-the-art. We can deliver much of what the larger institutions can deliver except we deliver it in a more community-oriented friendly, user-friendly manner. The Westchester landscape has historically been made up of many community banks along with the big banks. Over the last several years many of those good, strong, solid community banks have been bought up by other institutions. Hudson City, Bank, Sleepy Hollow National Bank, Union State Bank and City and Suburban, among others have all been acquired by larger banks. There are a number of really good community banks that have been bought up and really left for us an opportunity within our marketplace that hasn’t existed for a very long time.”
 

CEOCFO: How do you take advantage of consolidation and get new business?
Mr. Ritacco: “We have an active sales force in our branches and in the lending department. We actively call on small businesses, generally defined as somewhere below $10 million in sales. We actively participate in the communities. We have a foundation through which we invest back into the communities in high-profile events. We developed a whole new branch strategy. Our branches are modernized, and welcoming, and our logo branding has improved to a more modern type branding. We are competing in the community with a new look, a welcoming look, with products and services that have modern-day technologies to them as well as a group of people that are experienced and have been involved as sales folks for a while.”

CEOCFO: Beyond experience, what are the intangibles you look for in the people you employee?
Mr. Ritacco: “We look for people with honesty and integrity. We look for people that understand the importance of customer service in solving customer needs. We are not of the philosophy of just turning people over to 1-800 numbers. From our branch managers, our tellers, our corporate folks we focus on providing a high level of customer service and really try to resolve the customer’s issue as quickly as we can in order to make every customer a happy customer.”

CEOCFO: What might someone experience that is outside of the norm in terms of customer service at CMS?

Mr. Ritacco: “We cater to our senior citizens. We have attended March of Dimes walks; we attended a West Harrison Columbus Day parade. We support the community, we give not only donations, but our people are out there in the community making sure that the customers in those communities really understand how important they are to us in their respective communities.”

Mr. Dowd: “It is not unusual for one of our branch managers to help out a senior citizen by going to their house to help them take care of some sort of a banking issue. It is not unusual for one of our loan officers to stop by one of our business accounts to help them out with some issues like filling out mortgage applications or anything that would make their life easier”

CEOCFO: Do you find that many of your customers take advantage of a variety of services?
Mr. Ritacco: “In being a mutual that has been around since 1887, but historically has been pretty quiet in the community, we found that as we have grown over the last three years in particular, most of the client base didn’t really know the alternative other products we had available. Over the last three years we have modernized to phone banking system, we have offered individual and commercial customers remote capture, sweep accounts, more varieties to our CDs, and more levels to our money markets. We are trying to actively cross-sell our customers because many of them don’t realized all the services that we now have, and we are always trying to expand our services to anyone new.”

CEOCFO: Do you find a lot of your customers are coming to you for advice and reassurance these days?

Mr. Ritacco: “Yes, in particular since the financial crisis of September, more and more people are concerned about FDIC insurance than ever before. More people are enquiring on the stability and the strength of the bank to the best that they can glean from financial information. They really look for the branch manager’s comfort by seeing them on a regular basis, knowing that they can be assured that the bank is in good shape and they have to trust that the individual branch manager that gives them a level of security and comfort.”

CEOCFO: What is the financial picture for the bank?

Mr. Dowd: “In terms of the financial picture, all of our capital ratios are very strong. As of September 30^th the minimum ratio that you need to have in what is called the total risk-based capital ratio is a 10% ratio to be considered well capitalized. We were at 14.28%, well above the well capitalized level. There are some other ratios, one called the tier-one ratio where the minimum to be well capitalized is 6%, and we were at 13.8%. Another ratio that the regulators look at is called the leverage ratio, where to be defined as well-capitalized you need 5% and we were at 7.23 %. When you factor in the additional capital available at the holding company level, the ratios are even stronger. We do have a very strong capital position that will let us grow the bank over the next couple of years.”

CEOCFO: Why your decision not to accept TARP funding?

Mr. Dowd: “With regard to our decision on the TARP funding, to just give you a little history, there was a relatively short period of time that banks had to actually apply for TARP; I believe the cut-off was in November. We didn’t feel that we had enough time to fully evaluate whether we could use that capital well, and applied for it, knowing that we could withdraw the application. In the ensuing weeks’ we did a lot of analysis and a lot of work on how we might put that capital to work to help us grow the bank and grow our income and increase shareholder value. We ultimately concluded that we really didn’t need that capital over the next couple of years to grow the bank in a sound consistent manner the way we have over the past three years, and believe that when and if we need additional capital, it will be available from other sources that do not have the restrictions associated with TARP. Therefore, we decided that since we didn’t really need that the capital now and couldn’t put it to work effectively to increase shareholder value, that we would withdraw the application.”

Mr. Ritacco: “Especially when the regulations were pushing, as you saw in the hearings yesterday, the folks from the big banks to pinpoint exactly how they have lent that money out. We still have capital available to lend out, so we felt as though perhaps we didn’t need the additional capital, particularly with the strings that are attached to it. In addition, perhaps it might be a bit more difficult to segregate the amount of capital that we got from the TARP vs. the excess capital to show that we have done our extra lending. It was just a much more conservative financial place for us.”

CEOCFO: You do have a stock repurchase program; please tell us what that will do for you?
Mr. Dowd: “After we went public, the board of directors authorized the repurchase of 5% of the outstanding shares. It was viewed as being a good thing for the bank to do because on a short-term basis the buyback increases the shareholder value for the remaining shareholders. Clearly, there are other capital considerations down the road including additional buy-back programs, the potential for dividends, and the potential to expand the bank. We need to manage all of those things and all of the other capital needs of the bank very carefully. Late last year the management and the board of directors decided that an additional stock repurchase program of 5% of the outstanding made a lot of sense economically in terms of returning value to the shareholders. We authorized the repurchase of about 93,000 shares on that program, and we are roughly half way through that program at this point. In terms of the future, clearly on a regular basis we sit down with the board and talk about our capital planning strategy, and our capital needs, not only short-term over the next couple of months but also going out over the next one to three years. As for future buy-back programs, they make a lot of sense for us now, but they need to be weighed along with all of the other capital planning considerations.”

CEOCFO: What is ahead for the company?

Mr. Ritacco: “We will continue to grow the bank. We will maintain our conservative lending and investment strategies of the last three years. We will be opening a new office in Mt. Kisco; that will be our fifth branch office, probably some time in early April. We will continue to focus on building our customer relationships. Our hope is to continue to focus on our increasing our interest income, controlling our expenses and obviously building profits and shareholder value in the long-term.”

CEOCFO: In closing, why should investors be taking a look at CMS Bancorp?
Mr. Ritacco: “Investors should consider us as a new, evolving, emerging, company, looking to grow in the banking industry, and one that has an interesting and unique niche. Most of the big banks operate at a much higher level and there is a unique opportunity in the community bank level in our market area to grow. With conservative underwriting and the growth plans of the future I think that long-term there is some opportunity to build strong shareholder value.”

Mr. Dowd: “Over the last three years we have spent a lot of time and effort to transform the bank, to take what was a sleepy mutual bank, with some very old outdated branches, old outdated technology, and almost no growth in the years preceding the time John arrived here into something better. Over that three-year period, we think that we have built a real strong platform, a strong infrastructure so that we can grow in the future. We think that we have a great market place here and that we have things positioned to take advantage of the opportunity. We have a strong strategy and infrastructure in place including some great people we have added. We think that the marketplace that we are in provides some tremendous opportunity for us to grow, to become more profitable and to return some real value to our shareholders.”

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“The vision at CMS Bancorp is to be a consumer oriented bank focused on building our shareholder value, and conservatively increasing our loans and deposits through our community.” - John E. Ritacco

“In terms of the financial picture, all of our capital ratios are very strong. As of September 30^th the minimum ratio that you need to have in what is called the total risk-based capital ratio is a 10% ratio to be considered well capitalized. We were at 14.28%, well above the well capitalized level. There are some other ratios, one called the tier-one ratio where the minimum to be well capitalized is 6%, and we were at 13.8%. Another ratio that the regulators look at is called the leverage ratio, where to be defined as well-capitalized you need 5% and we were at 7.23 %. When you factor in the additional capital available at the holding company level, the ratios are even stronger. We do have a very strong capital position that will let us grow the bank over the next couple of years.” - Stephen E. Dowd